PG&E 2013 Annual Report Download - page 102

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14: COMMITMENTS AND CONTINGENCIES (Continued)
Pending CPUC Investigations
There are three CPUC investigative enforcement proceedings pending against the Utility that relate to (1) the
Utility’s safety recordkeeping for its natural gas transmission system, (2) the Utility’s operation of its natural gas
transmission pipeline system in or near locations of higher population density, and (3) the Utility’s pipeline
installation, integrity management, recordkeeping and other operational practices, and other events or courses of
conduct, that could have led to or contributed to the San Bruno accident.
The SED has issued investigative reports and briefs in each of these investigations alleging that the Utility
committed numerous violations of applicable laws and regulations. In July 2013, the SED recommended that the
CPUC impose what the SED characterizes as a penalty of $2.25 billion on the Utility, allocated as follows:
(1) $300 million as a fine to the State General Fund, (2) $435 million for a portion of costs related to the Utility’s
PSEP that were previously disallowed by the CPUC and funded by shareholders, and (3) $1.515 billion to perform
PSEP work that was previously approved by the CPUC, implement operational remedies, and for future costs. (See
‘‘Disallowed Capital Costs’’ below.) Other parties, including the City of San Bruno, TURN, the CPUC’s ORA, and
the City and County of San Francisco, have recommended total penalties of at least $2.25 billion, including fines
payable to the State General Fund of differing amounts.
The ALJs who oversee the investigations are expected to issue one or more presiding officers’ decisions to
address the violations that they have determined the Utility committed and to impose penalties. It is uncertain when
the decisions will be issued. Based on the CPUC’s rules, the presiding officer’s decisions would become the final
decisions of the CPUC 30 days after issuance unless the Utility or another party filed an appeal with the CPUC, or a
CPUC commissioner requested that the CPUC review the decision, within such time. If an appeal or review request
is filed, other parties would have 15 days to provide comments but the CPUC could act before considering any
comments.
At December 31, 2013, the Consolidated Balance Sheets included an accrual of $200 million in other current
liabilities for the minimum amount of fines deemed probable that the Utility will pay to the State General Fund. The
Utility is unable to make a better estimate due to the many variables that could affect the final outcome, including
how the total number and duration of violations will be determined; how the various penalty recommendations made
by the SED and other parties will be considered; how the financial and tax impact of unrecoverable costs the Utility
has incurred, and will continue to incur, to improve the safety and reliability of its pipeline system, will be
considered; whether the Utility’s costs to perform any required remedial actions will be considered; and how the
CPUC will respond to public pressure. Future changes in these estimates or the assumptions on which they are based
could have a material impact on PG&E Corporation’s and the Utility’s financial condition, results of operations, and
cash flows. The CPUC may impose fines on the Utility that are materially higher than the amount accrued and may
disallow PSEP costs that were previously authorized for recovery or other future costs. Disallowed capital
investments would be charged to net income in the period in which the CPUC orders such a disallowance. See
‘‘Disallowed Capital Costs’’ below. Future disallowed expense and capital costs would be charged to net income in
the period incurred.
Other CPUC Enforcement Matters
PG&E Corporation and the Utility are unable to estimate the amount or range of reasonably possible losses
that may be incurred in connection with the following matters.
96